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TMI Blog1990 (10) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings for the assessment year 1967-68, the Income-tax Officer brought to tax as capital gains, the difference between the sale price of Rs. 50,000 and the cost of acquisition of the mare at Rs. 15,000, i.e., Rs. 35,000. Although the appeal by the assessee before the Appellate Assistant Commissioner was originally dismissed, on further appeal to the Tribunal, it remitted the matter to the Appellate Assistant Commissioner and the Appellate Assistant Commissioner held that though there was no cost of acquisition for the colt and the filly, yet the expenditure on the upkeep and maintenance of the mare as well as the colt and the filly had to be deducted in computing the capital gains, as such expenditure would amount to cost of improvement. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined the quantum of aggregate deduction at Rs. 25,000 and adding that amount to the cost of acquisition of the mare, i.e., Rs. 15,000, the assessable capital gains were computed at Rs. 10,000 (Rs. 50,000-(Rs. 25,000 plus Rs. 15,000)). Under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), at the instance of the Revenue, the following questions of law have been referred to this court for its opinion : " (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in computing the capital gains at Rs. 10,000 on the sale of the horse for the assessment year 1967-68 ? (2) Whether, on the facts and in the circumstances of the case, the maintenance expenses on the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certainly would constitute improvement of not only the mare, but also the filly and the colt, till the time of their sale and was, therefore, rightly taken into account by the Tribunal for purposes of deduction and that the ultimate conclusion of the Tribunal computing the assessable capital gains at Rs. 10,000 was also quite in order. We may first take up the third question for consideration. Though some dispute appears to have been raised before the authorities below on whether the mare was the personal effects of the assessee or a capital asset, it was not disputed before the Tribunal or even before this court that the mare, acquired by the assessee, was a capital asset. No doubt, at the time when the asset was acquired, the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure incurred by the assessee, though apparently on the mare, was really for the purpose of nurturing, protecting and preserving the foetus of the colt and the filly in good shape and health, in order that healthy offspring were brought into existence by the mare. The expenditure thus incurred by the assessee for this purpose, though it might at first sight appear to be routine maintenance or upkeep expenses of the mare, was really intended to bring into being the offspring in the shape of the colt and filly, and, in that sense, could be legitimately regarded as cost incurred by the assessee in the acquisition of the colt and the filly. We may also observe that if the expenditure incurred by the assessee during the stay of the mare at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded as the cost of acquisition of the colt and the filly falling under the first part of section 48(ii) of the Act. In view of that, the expenses incurred by the assessee as training fee on the animals would properly constitute the cost of improvement falling under the latter part of section 48(ii) of the Act. Nevertheless, the second question as referred also comprehends and takes within its sweep the maintenance expenses on the mare and the offspring, as forming part of the cost of improvement of the asset. In view of the frame of the second question, even if the cost of acquisition of the colt and the filly should be regarded as "nil", it would still be a matter for consideration as to whether the expenses incurred by the assessee would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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